- Ripple co-founder Chris Larsen has criticised the proof-of-work consensus mechanism for its energy consumption and called for Bitcoin to switch to proof-of-stake.
- Bitcoin’s massive energy consumption is eroding all the good that the cryptocurrency is doing and could ultimately cost it the support of institutional investors.
Bitcoin should consider switching from the current energy-intensive proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS). This is according to Chris Larsen, the co-founder, former CEO and current chairman of Ripple. Larsen believes that PoW is eroding all the good that Bitcoin is doing to the global financial system.
In a blog post, Larsen acknowledged that cryptocurrencies have exploded into the mainstream and are changing lives. “It means hundreds of millions more people will have access to more efficient and affordable financial services,” he noted.
However, Bitcoin’s PoW consensus mechanism is undoing most of this good, he believes.
While many newer cryptocurrencies are already low consumers of energy or even carbon-neutral, early protocols such as Bitcoin use a core technology called Proof-of-Work (PoW) to validate transactions, which is not only a huge and growing source of CO2 emissions but also uses massive amounts of energy, both from fossil fuels and “green” sources.
Larsen stated that even those who were involved in Bitcoin in the early days, like Hal Finney, know PoW has an issue.
Thinking about how to reduce CO2 emissions from a widespread Bitcoin implementation
— halfin (@halfin) January 27, 2009
In the current market, 43 percent of all cryptocurrencies by market cap employ PoS. In addition, Ethereum, the second-largest crypto after Bitcoin, is switching to PoS. “It’s clear which way the trend is moving,” he observed.
We should see PoW for what it is — a brilliantly designed technology that is becoming outdated in today’s world.
Switch to PoS, embrace the future
Larsen called for Bitcoin – and other PoW cryptos – to make the switch to proof-of-stake or other energy-efficient consensus mechanisms.
Cryptocurrencies that use PoW should consider a code change to another validation method such as Proof-of-Stake (PoS) or Federated Consensus (or something yet to be developed), which have also proven effective in securing their stored value while using a tiny fraction of the energy.
The crypto community has lots to celebrate this Earth Day. Many are working towards a clean energy future — however, transitioning to 100% renewables only solves part of the problem. My belief: the Bitcoin community should consider moving from PoW. 1/5 https://t.co/RophJqMmjW
— Chris Larsen (@chrislarsensf) April 21, 2021
I know this is a bold proposal, but it’s worth considering, he stated. He went on to look at how XRP has been using Federated Consensus for years to validate transactions. “It’s closed 62+ million ledgers without downtime, uses the energy equivalent of just 50 U.S. homes per year, and is already carbon neutral,” he said.
Further, Larsen debunked some of the arguments for PoW. One of them is that the energy-intensive nature of PoW will catalyze the renewable energy industry. This argument is spurious, he believes. Already, investment into this sector is soaring.
PoW proponents have also claimed that it uses “trapped energy.” However, scientists are already working on building proper technology that will utilize this energy. Those who argue that PoW is the best use of renewable energy are wrong as well. “…until we become globally carbon-neutral, PoW is in direct competition with more urgent energy needs that must make the switch to renewables; industries like concrete and steel, air travel, and agriculture.”
Bitcoin could lose institutional investors
Bitcoin has attracted lots of institutional investors in the past few years. However, it risks losing them in the future if it doesn’t improve on its energy consumption.
They will undoubtedly face pressure (from consumers and regulators alike) to reduce or divest their PoW crypto holdings — including bitcoin. The Bitcoin community should see this as a significant risk and work to address it.
Ripple’s CEO Brad Garlinghouse has also criticized Bitcoin’s energy consumption. In a recent interview, he claimed that one Bitcoin transaction requires 75 gallons of gasoline.
Energy consumption for BTC and ETH mining is a massive waste and there’s no incentive to take responsibility for the carbon footprint. Absolutely 🤯 that this isn’t high on the agenda for the growing climate crisis… https://t.co/psR77m78Ua
— Brad Garlinghouse (@bgarlinghouse) March 4, 2020